Originally Posted by kane

For many manufacturing companies it works like this:

1. Company sales team bids on and is awarded a job by another company.
2. Money is then spent by Company to buy what they need in order to do the job they were just awarded.
3. The job is worked on.
4. The job eventually gets finished and the order is filled, or if it is an ongoing job the first batch of products due are shipped to the customer.
5. Company then gets paid.

During this process the company often has to cover all the costs of production including payroll, equipment/tool purchases and any outside contractors they may have to hire. When they get paid for delivering the product they recoup their costs, but if the company doesn't have a decent cash reserve they may have to rely on short term credit to cover their costs while they do the work.